Australian Universal Coal Seeks Partnership in South Africa

Australia-listed miner Universal Coal is in talks with potential Chinese and Indian partners to invest in its Berenice-Cygnus coking coal project close to South Africa’s border with Mozambique. It may appoint a financial adviser to manage the process of tying in with a strategic partners.

Talks with steelmakers have been on an informal basis so far. Recently, there has been heightened interest in South African coal from steelmakers, who are increasingly frustrated by infrastructure bottlenecks, lengthy permitting processes and a lack of big deposits for investment elsewhere in the world, including Australia. ArcelorMittal, the world’s biggest steel producer by market share, has already secured a stake in the country through a 16% ownership in Coal of Africa.

Investing in South Africa comes with inherent risks such as rising costs in mining, reliability of power supplies and the possibility of nationalising the mining industry. Yet, many Chinese and Indian companies already have heavy investments in parts of Africa, such as the Deomocatic Republic of Congo, in spite of its comparatively unstable social and political conditions.

Universal Coal Chairman Tony Harwood said last month that the Berenice-Cygnus project in Limpopo province has a gross resource of at least 1.3 billion tons of soft coking coal, and it has the potential to become a mining operation capable of producing between 10 million and 15 million tons by 2015. The coking coal projects are “set to be a major focus for the company in 2012,” he said at the time.

Shares in Universal Coal jumped 12%, or 2.5 Australian cents, to A$0.24 each after it confirmed the news to value the company at A$42 million (US$44 million).

Connect with Mr Tony Harwood, Chairman of Universal Coal at the Asia Mining Congress 2012 as he shares his company’s projects in South Africa. Download programme brochure here.